Intel's 2Q Numbers Show PC Industry's New Approach

SANTA CLARA (CBS/AP) - Intel Corp. said its results for the latest quarter were better than expected as it milked strong corporate demand for PCs and the need for new computer servers to handle Internet traffic on mobile devices.

But the second-quarter numbers, reported Wednesday, don't necessarily mean that the PC business, which Intel helped create three decades ago, is in great shape.

Consumer demand for PCs in the U.S. and Europe has been weak for the past year. Stacy Smith, Intel's chief financial officer, said in an interview that it is expected to remain "relatively soft" for the remainder of 2011.

Shipments into those markets are actually decreasing, according to market research IDC and Gartner Inc. released last week.

But Intel's latest numbers provide a map for how the industry plans to find its way out.

Intel's net income rose just 2 percent to $2.95 billion, or 54 cents per share, from $2.89 billion, or 51 cents per share, a year ago. Excluding some expenses, Intel earned 59 cents per share, ahead of analyst expectations for 51 cents per share, according to FactSet.

Revenue rose 21 percent to $13.03 billion, also ahead of analyst projections for $12.8 billion.

Intel projected revenue of $13.5 billion to $14.5 billion in current quarter; analysts' estimates were at the low end, $13.5 billion.

The higher numbers reflect three trends that Intel and its customers - the big PC makers - plan to ride to stronger growth even as parts of their business contract because of market saturation and the popularity of tablet computers.

First, corporations are still upgrading their employees' PCs. They are believed to be only in the middle of a multi-year cycle.

Emerging markets such as India and China are seeing strong PC growth, as incomes rise and more marketing efforts are targeted there.

And the smartphone and tablet craze, which PC makers are desperately trying to latch onto, benefits a company such as Intel because more servers are needed to handle the crush of new mobile Internet traffic.

Investors' reaction was muted in extended trading, after the results were reported. Intel shares fell 5 cents, or 0.2 percent, to $22.94.

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